Save taxes with IDFC Infrastructure Bonds 2011

IDFC is once again out with infrastructure bonds – IDFC Tax Saving Long Term Infrastructure Bonds. You can invest in the same upto Rs. 20,000 to save tax. Below are the details of the same.

These bonds have got the highest credit rating of (ICRA) AAA by ICRA and Fitch AAA (ind) by Fitch.

Issue opens: November 21, 2011

Issue closes: December 16, 2011

Scheme Features: IDFC Infrastructure Bonds 2011

Series

1

2

Face Value

5,000 per Bond

Minimum number of bonds per application

Two bonds and in multiples of one bond thereafter.

For the purpose of fulfilling the requirement of minimum subscription of two bonds, an applicant may choose to apply for two bonds of the same or different series.

Interest payment

Annual

Cumulative

Interest Rate

9% p.a.

N.A.

Maturity Amount

5,000

11,840

Maturity

10 years from the deemed date of allotment

Yield on Maturity

9%

9% compounded annually

Buyback Facility

Yes

Yield on Buyback

9%

9% compounded annually

Buyback Date

Date following 5 years and one day from the deemed date of allotment

Buyback Amount

5,000 per bond

7,695 per bond

Salient Features: IDFC Infrastructure Bonds 2011

The bonds don’t attract any TDS in case the investments are in demat form

The bonds are available in Demat & Physical form

The bonds will be listed on NSE and BSE and can be traded after the 5 year lock-in period

Investors can mortgage or pledge these bonds to avail loans after the lock-in period.

An investor would need a PAN card to invest in these bonds.

The bonds will be issued only to Resident Indian Individuals and HUF

An applicant may subscribe to the two series of Bonds offered but the minimum application under each series shall be one bond i.e., 5,000

Interest on the Bonds shall be payable on annual or cumulative basis depending on the series selected by the bond holders

The interest accrued on the bonds will be credited to the respective bank registered with the demat account through ECS on the due date for interest payment

Should you invest in IDFC Infrastructure bond 2011?

Rate of interest for PPF is 8.6% while in IDFC Bond you can lock-in your investment for 10 years at 9% interest. I think its the right time to invest in IDFC Infrastructure Bonds 2011.

Your returns would depend on the tax bracket you are. For details on the same Click here.

If you are in 30% tax bracket your annual return would be 15.6% per annum

while for 20% tax bracket your return would be 13% and

for 10% tax bracket the returns would be 10.85%

I think its a decent return and its recommended to lock-in in such tax saving instruments at this high interest rate period.

To Conclude:

I suggest everyone in the higher tax bracket to subscribe to the Infrastructure bonds. You may subscribe to this IDFC bond or wait for other institutions to issue these kinds of bonds. But by the end of this financial year you must opt to save tax on additional Rs 20,000!

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